Systems and methods for providing enhanced account management services for multiple banks

ABSTRACT

A method, system and program product, the method comprising: accessing databases comprising: aggregated accounts held at a first banking institution participating in an interchange program, the interchange program comprising a plurality of FDIC-insured and interest-bearing aggregated deposit accounts held in a plurality of banking institutions; and client account information obtaining transfer data for client accounts; receiving aggregated account transfer information for aggregated deposit accounts held in the first banking institution, based at least in part on a difference between the amount comprising a total of funds from the client transaction accounts of the first banking institution held in the aggregated deposit accounts in the other banking institutions participating in the interchange program and the total of funds held in the one or more aggregated deposit accounts held in the first banking institution; receiving a transfer of funds; updating the databases.

This application is a Continuation of application Ser. No. 10/382,946,filed Mar. 6, 2003, now U.S. Pat. No. 7,536,350, which is aContinuation-in-Part of application Ser. No. 09/677,535, filed Oct. 2,2000, now U.S. Pat. No. 7,752,129, and is a Continuation-in-Part ofapplication Ser. No. 10/071,053, filed Feb. 8, 2002, now U.S. Pat. No.7,519,551, both of which are Continuations-in-Part of application Ser.No. 09/176,340, filed Oct. 21, 1998 and now U.S. Pat. No. 6,374,231.U.S. application Ser. No. 10/382,946 also claims benefit of ProvisionalApplication Ser. No. 60/442,849, filed Jan. 27, 2003. The entirety ofthe disclosure of each of these applications is incorporated herein byreference for all purposes.

FIELD OF THE INVENTION

The present invention provides systems and methods that deliver accountmanagement services to multiple participating financial institution(including banks) so that they may offer to their customersinterest-earning, deposit accounts without withdrawal restrictionsand/or with enhanced deposit insurance. This invention's managementmethods preferably maintain each participating financial institution'stotal customer funds on deposit.

BACKGROUND OF THE INVENTION

It would be desirable if depositors and investors could obtainfully-insured, interest-bearing accounts with an unlimited number oftransactions or withdrawals per month. However, present statutory andregulatory requirements, which in the United States (“US”) are generallycodified as Title 12 of the United States Code (“U.S.C.”) (Banks andBanking), restrict the flexibility of banks and savings institutions,and limit investors and depositors seeking investments and depositshaving a lower risk profile to a rather limited selection of choices,all of which suffer inhibiting constraints.

First, Title 12 U.S.C. Chapter 3 (Federal Reserve System), along withTitle 12 Code of Federal Regulations (“C.F.R.”) Chapter II Part 204 (12C.F.R. §§204.1-204.136) (Federal Reserve Board (“FRB”) Regulation D) andTitle 12 C.F.R. Chapter II Part 217 (12 C.F.R. §§217.1-217.101) (FRBRegulation Q), prevents certain financial institutions from payinginterest on deposit accounts that permit unlimited (at least more thansix) monthly withdrawals of deposited funds (known as “demand depositaccounts” or “DDAs”). More specifically, 12 C.F.R. 329.2 states that “nobank shall, directly or indirectly, by any device whatsoever, payinterest on any demand deposit”. A “deposit” is any money placed into achecking account, savings account, Certificate of Deposit (CD), or thelike. In a “demand” account, the owner can make an unlimited number offunds transfers to another account (having the same or a differentowner), or to a third party, typically by bank drafts, checks, creditcards, and debit cards. In other words, an account in which a depositorhas the ability to make six or more monthly transfers will be deemed ademand account and no interest will be payable on the funds depositedtherein (unless the funds of a non-commercial entity are held in a NOWaccount under 18 U.S.C. 1832(a)). Owners of demand accounts are deniedinterest on their funds.

Second, 12 U.S.C. §1821(a) limits government-guaranteed depositinsurance provided by the Federal Deposit Insurance Corporation (“FDIC”)to a maximum coverage of $100K (K=1,000) for each owner of (or,generally, each ownership interest in) funds deposited in a singleinsured institution. The FDIC, created under Title 12 U.S.C. Chapter 3(the Federal Deposit Insurance Corporation), provides insurance fordeposits in most United States banks through its Bank Insurance Fund(“BIF”) and in most United States savings institutions through itsSavings Association Insurance Fund (“SAIF”). The rules governinginsurance of deposits in institutions insured by the BIF and the SAIFare the same, and base insurance coverage on the concept of ownershiprights and capacities. Funds held in different ownership categories areinsured separately from each other; and funds owned by the sameownership category but held in different accounts at the same financialentity are subsumed under the same insurance coverage limit.

Banks and other savings institutions have developed several approaches,which include money-market mutual fund sweeps and re-purchase agreement(“repo”) sweeps, offered by third parties in an effort to compete withthose financial institutions, for example broker/dealers, who are ableto offer interest on cash balances for all their customers includingcommercial customers by using money-market mutual funds. However, theseapproaches are disadvantageous in that they involve a removal ofcommercial customer deposits from the bank's balance sheets into theassets of the money market-mutual fund provider, and also of thedeposits from FDIC protection. This disadvantage is especiallyburdensome for smaller banks, such as regional or local banks.

Therefore, what is needed are systems and methods for providingfully-insured (i.e., with insurance that may exceed $100,000),interest-bearing accounts with an unlimited number of transactions permonth without removing net deposits from participating financialinstitutions. It would be especially advantageous if these systems couldbe readily integrated into the existing infrastructure of a bank,savings institution, credit union, or other financial institution in amanner that would minimally disrupt these institution's existingcustomer relationships.

Citation or identification of any reference in this section or anysection of this application shall not be construed that such referenceis available as prior art to the present invention. Further, headingsand sub-headings are used for convenience and clarity only; they are notto be interpreted in any limiting fashion.

SUMMARY OF THE INVENTION

The present invention overcomes deficiencies in the prior art byproviding systems and methods that extend in a novel and advantageousmanner certain prior inventions made by one or more of the currentinventors. These prior inventions may be briefly summarized as follows(for the purposes of this invention only and without any limitation).

In prior application Ser. No. 09/176,340, filed Oct. 21, 1998 and nowU.S. Pat. No. 6,3743,231 B1 (the “parent invention”) (which isincorporated herein by reference in its entirety for all purposes)systems and methods are disclosed for managing demand accounts ofmultiple customers of any financial institution. That invention investsthe customer account funds in a single aggregated investment account ata bank, and manages the single investment account so that the accountfunds invested therein earn interest and are insured, while providingfor customer deposits and unlimited withdrawals by use of a wide rangeof financial networks and services. However, insurance for individualcustomer accounts is limited by the $100K FDIC maximum-coverage limit,so balances over $100,000 are not insured.

Prior application Ser. Nos. 09/677,535, 10/071,053, and 60/372,347(which are incorporated herein by reference in its entirety for allpurposes) disclose various improvements of the above invention. Priorapplication Ser. No. 10/071,053, filed Feb. 8, 2002, adapts the aboveinvention to banks, especially smaller banks, that wish to retain closecustomer relationships and additionally do not wish their ability tomake loans affected by sweeping deposited funds to a money-market mutualfund or a difficult-to-manage repurchase program (where assets must becollateralized), because deposited funds can be important as a sourcefor funding loan demand. In that invention, systems and methods areprovided that act as an agent of a bank to assist in transferring(“sweeping”) funds between customer demand-deposit accounts andinterest-earning, insured, investment accounts (“money market” accounts)maintained in the bank. The provided systems integrate closely with thebank's existing systems, and may optionally interface with externalfinancial network and service systems.

Prior application Ser. No. 09/677,535, filed Oct. 2, 2000, overcomes the$100K limit on individual deposit insurance by providing systems andmethods managing multiple insured investment accounts with each accountheld at a separate bank (or other financial institution). The inventiontransfers the bank-customer's funds among the separate banks so that nocustomer of the bank has more than $100K invested in any one of theseparate banks. Deposits are managed also to earn interest while beingavailable for unlimited withdrawals by use of a wide range of financialnetworks and services. Accordingly, customers of the bank with demandaccount balances exceeding $100K may be now covered by FDIC insuranceavailable through multiple banks, although deposit balances exceedingapproximately $100K must be transferred out of the initiating bank.

Prior application Ser. No. 60/372,347, filed Apr. 12, 2002 adds aflexible interest rate feature to the above inventions. According tothis feature, a financial institution (or a bank) may pay interest on acustomer account that depends on a wide range of factors, for example,on the balance in the customer account, on the total customer balance atthe financial institution, on marketing considerations, and so forth.

Accordingly, the objects of the present invention include systems andmethods that provide participating financial institutions with theability to offer to customers deposit accounts an unlimited number ofmonthly transactions while improving upon these prior inventions.

It is an object of the invention that the funds deposited in theinsured, interest-earning, deposit accounts at participating financialinstitutions remain on the institutions' books and available for normalbusiness purposes, such as a source for loan funding; or in other words,that the methods of this invention maintain each participatinginstitutions total deposited funds.

It is another object of the invention that funds deposited in thedeposit accounts at participating financial institutions earn interest.

It is another object of the invention that interest may be earned oncustomer deposits at interest rates based on plural discrete tiers (oron a more smooth function) selected in accordance with each customer'saccount parameters such as current cash balance, nature of thecustomer-financial entity relationship, and so forth.

It is another object of the invention that funds deposited in one of theinterest-earning, deposit accounts at the participating financialinstitutions are fully FDIC-insured, whether or not they exceed $100K.

It is another object that the systems and methods of the invention bereadily integrable into the existing institutional infrastructure andhave minimal impact on presently-existing customer relationships.

It is another object of the invention that its methods and system topermit customers to deposit funds into, and to withdraw funds from, anaccount by use of many financial instruments networks, and services, andto accept and process customer deposit/withdrawal transactions howeverpresented, such as in periodic batches or files.

These objects are met at least in part by systems and methods thatmanages a novel arrangement of accounts, especially pairs of demanddeposit and money market accounts holding funds from plural customersub-accounts at the participating banks, that is particularlyadvantageous in view of the applicable United States banking laws andregulations. To simplify subsequent descriptions, the followingparagraphs describe aspects of the banking environment of this inventionand explain certain terms used throughout the description.

Concerning the banking environment, generally, relevant banking laws andregulations prohibit institutions from paying interest on depositaccounts not subject to any withdrawal restrictions whatsoever (referredto as “demand accounts,” or as “demand deposit accounts” abbreviated as“DDA”), while permitting interest on deposit accounts subject towithdrawal restrictions, such as a required withdrawal notice (referredto as “savings accounts”).

Nevertheless, certain deposit accounts not requiring withdrawal noticebut subject to other withdrawal restrictions may still be deemed“savings accounts” capable of earning interest. For example, accountsknown as money market deposit accounts (“MMDA”) that do not requirewithdrawal notice (but may so require it at any time) are neverthelessdeemed savings accounts capable of earning interest if withdrawals ortransfers to third parties are limited to less than six monthly. (See 12C.F.R. §204.2(d)(1).). But certain types of transfers from MMDAs areexempt from this six-withdrawal limit. (See 12 C.F.R. §204.2(d)(2).)Specifically, an unlimited number of monthly transfers may be madebetween an interest-earning MMDA account and a DDA account if (i) bothaccounts are in the same financial institution (or bank), (ii) bothaccounts are registered in the same name, and (iii) transfers areordered in person, such as by messenger or other agent. An unlimitednumber of deposits into savings accounts or MMDAs is always allowed.

Second, the $100K FDIC insurance limitation is determinedper-beneficial-ownership category per-insured institution, and is notdetermined on a per-account basis. For example, all ownership interestsof a single person (or other entity) held in a single insuredinstitution, whether they are held in multiple separate accounts andwhether they are held in a single account pooled with the interests ofothers, are all aggregated for purposes of the $100K coveragelimitation. Further, a person's ownership interests in separate insuredinstitutions are treated separately, and are separately aggregated ineach institution for purposes of the separate $100K coverage limitationavailable in each institution. (See 12 U.S.C. §1821(a)(1)(C).)Consequently, a person's deposit coverage will not be reduced orjeopardized if it is combined with the interests of others in a singleaccount, and may be increased if that person's ownership interests aredeposited in separate or aggregated accounts in multiple institutions.

Therefore, this invention establishes and manages a pair ofidentically-registered accounts (referred to as a “MMDA-DDA pair”) inone or all of the financial institutions (or banks) participating in animplementation of this invention. One account of each pair is aninterest-earning MMDA subject to withdrawal limitations; the otheraccount is a DDA not subject to any withdrawal limitations and thereforenot interest-earning. Funds deposited in participating banks byparticipating customers are invested and held in the MMDAs in theparticipating institutions. Participating customers may be, for example,individuals, business entities, governmental entities, and so forth,because MMDA depositors may be of many organizational types. The DDA ofeach pair serves merely as a conduit through which to withdraw ortransfer funds from (and, optionally, to) the paired MMDA. Since bothaccounts of each account-pair are identically registered at eachparticipating bank, and since fund transfers from the MMDA through thepaired DDA are ordered in person (by messenger or other agent), fundsinvested in the MMDA continue to earn interest even though they may bewithdrawn through the paired DDA without restriction. In this manner,this invention achieves its objectives while comporting with theabove-described banking environment.

In many embodiments, an organization entity (referred to as an“operating entity” or as an “administrator”) has responsibility for thepreviously-described account pairs, along with other accounts maintainedand managed by this invention, and for funds transfers among theaccounts. In particular, the MMDA-DDA account pairs in the participatingbanks may registered as “administrator (or organizational name of theoperating entity) as agent for designated customers.” The operatingentity typically will act as an agent for the participating customersand the participating banks according to agreements entered into whencustomers or banks become participants in implementations of thisinvention. The administrator (or other operating entity) may also manageand operate the systems and methods of the present invention. Theadministrator, or operating entity, may be structured according to themany known forms of business organization, such as proprietorship,partnership, joint venture, corporation, and the like. Also, theadministrator may be a business entity independent of all participatingbanks, or may be a subsidiary of one of the participating banks, or maybe a joint venture of the banks,

Next, for convenience and clarity, the following terms used in thepresent specification have the following meanings. First, the term“financial institution” (and “participating financial institution”)refers to institutions that may participate in the present invention byvirtue of having certain preferred characteristics. One characteristicis that participating financial institutions offer accounts againstwhich customers may make a variety of deposit and withdrawaltransactions, where different types of participating institutions mayoffer customers different types of transactions. Another preferredcharacteristic is that a participating financial institution offerinterest-bearing, insured MMDA-type accounts, or be associated in somefashion with a financial institution that does offer such accounts. SuchMMDAs are generally offered by banks, and because the present inventionmanages participating customer accounts by investing their funds in oneor more MMDAs, a participating financial institution derives greaterbenefit from the invention if it receives some value for these MMDAinvestments by being associated with one or more banks holding theseMMDA investment accounts. In particular, banks may be participatingfinancial institutions and receive direct benefit from the methods ofthe present invention by both offering customer accounts and providingMMDAs for investment, which may be available according to this inventionas deposit accounts for other participating financial institutions.Also, broker/dealers, investment advisors, insurance companies, and soforth that may be participating financial institutions. Here, the fundsof the customer accounts are invested in MMDAs in a bank designated byparticipating institution. A designated bank may not have any particularaffiliation with the designating financial institution, or may beaffiliated or associated in manners known in the art (for example, acorporate entity with a banking subsidiary and a broker/dealer, aninsurance, or an investment advisory subsidiary, or a bank or bankholding company with a broker/dealer subsidiary, or so forth).

Therefore, generally, the term financial institution refers to all suchpreferred institutions with any banking association or affiliationpermitted by law and regulation. However, for convenience and claritybut without limitation, the following description is often in terms ofembodiments where participating institutions are banks holding bothcustomer accounts and the investment MMDAs. If some participatingcustomer accounts are in, for example, a broker/dealer, it is to beunderstood that the associated MMDA-DDA pair is held in the affiliatedor associated bank. Also, where customer accounts are referred to in thebanking embodiment as DDAs, it is also to be understood that in generalcustomer accounts may also be broker/dealer accounts, investmentadvisory accounts, and so forth.

Customers of a participating financial institution (or bank) mayindividually choose whether or not one or more of their accounts at thatinstitution will participate in the enhanced insurance and managementservices of this invention. Managed accounts are referred to as“participating customer accounts,” of for convenience, simply as“customer accounts” or even as “customers.” Without limitation, a singleindividual customer may have non-participating accounts at participatinginstitutions, or may have two or more participating accounts at the sameor at different participating institutions, or so forth.

Funds deposited in a participating customer account are referred to asthat “customer's participating funds” or more simply as “customer'sfunds” or as “participating funds.” Also, all participating funds heldin the participating customer accounts at a single participatingfinancial institution are referred to as that institution's “aggregate(or total) participating customer funds,” and all funds held at aninstitution for all participating customers (not just that institution'scustomers) are referred to as the institutions “aggregate (or total)participating deposits.”

Where attention is focused on a particular one of the participatinginstitutions, it will often be referred to as “this institution,” whilethe remaining participating institutions will be then referred to as the“other institutions.” Further, the institution of a customer account,that is the institution at which the customer transacts business forthat account, is referred to as the “primary institution” for thatcustomer account or customer; other participating banks are “secondarybanks” for that customer account or customer. Each participatingcustomer account (or customer) has exactly one primary bank.

Commonly-available deposit insurance (for example, FDIC insurance) oftenlimits coverage to a certain maximum for all the funds of a singleownership category in a single insured institution. It is oftenpreferable for embodiments of this invention to limit the maximum amountof a single customer's funds held in a single institution to a “targetamount” (or “target”) which is less than the maximum coverage of theavailable deposit insurance. The target amount is often 99%, or 98%, or95% or 90%, or other convenient percentage of the coverage limitation.In the case of FDIC insurance, a preferred target amount is 95% of thecoverage limitation of $100K, or $95K; other exemplary target amountsmay be $90K or $98K or $99K or other amount. Less preferably, the targetamount may be 100% of the coverage limitation.

Also, the following abbreviations may be used in this specification andfigures: “acct.” for account; “cust.” for customer; “DDA” for demanddeposit account; “inst.” for financial institution (such as a bank);“MM” for money market; “MMDA” for money market demand account; “xaction”for transaction.

Now, in view of the above-described banking environment, thisinvention's objectives are achieved as follows. Generally, theadministrator (or operating entity) of an embodiment of the systems andmethods of this invention provides account services to multipleparticipating customers (at least one) with accounts at multipleparticipating financial institutions (at least two). The administratorestablishes and maintains in each participating bank one of theabove-described MMDA-DDA account pairs and allocates and investsparticipating customer funds in the interest-earning MMDA accounts inamounts guided by objectives and rules selected so that objects of thisinvention are achieved.

A first preferred objective is to allocate and invest customer funds sothat each customer has available a substantial maximum amount of depositinsurance available in each particular embodiment consistent with thepracticalities of financial transaction processing. Where the availabledeposit insurance has fixed coverage limits in each participatinginstitution, this objective may be achieved by a rule according to whichno more than the target amount of funds (alternatively, no more than theinsurance coverage limitation) is invested in each participatinginstitution (or in an associated or affiliated institution). By the useof a target amount, the methods of this invention are able topractically provide a substantial maximum of deposit insurance for acustomer. It is preferably that the target amount be as close to thecoverage maximum as is consistent with practical transactionadministration and processing. If full insurance coverage is notpossible, because, for example, the customer account balance exceeds thecoverage limitation (or the target amount) times the number ofparticipating institutions, then excess uninsured funds are preferablykept at the customer's primary institution.

More generally, this invention's first objective is to reduce eachcustomer's risk of loss. Preferably deposit insurance is available, andthis objective is achieved by the above-described rules which fullyinsures a customer's deposits if possible. Where deposit insurance isnot available for some or all of a customer's deposits, risk may bereduced by dividing a customer's deposits across such participatinginstitutions that are financially independent of each other. Forexample, customer deposits in excess of the maximum insurance availablein an embodiment of this invention, may be spread evenly across theparticipating institutions. Alternatively, customer deposits may beinvested according to rules prescribed by the that customer For example,the customer may provide a list of participating institutionsprioritized for allocation and investment.

A second preferred objective is not to impact each participatinginstitutions total deposited funds. A corresponding rule is that for anytransfer of customer funds out of a financial institution to reduce riskof loss, there should be a substantially equal transfer of otherparticipating funds into this institution. For example, if the customersof a participating bank have placed $100M into the program, then $100Min deposits should remain on the bank's balance sheet, whether these aredeposits of the bank's own customers or of customers of otherparticipating banks (or financial institutions). This objective isadvantageous to institutions which use their deposits for importantbusiness purposes, for example, for funding loans.

Investment and allocation of participating funds may also be guided bysecondary objectives which should be satisfied if possible withoutjeopardizing the two previous preferred objectives. One preferredsecondary objective advantageous to participating institutions is to notallocate a customer's funds away from that customer's primary bankunless necessary. For example, customers accounts with balances lessthan $95,000 should not be allocated to other participating banks.However, meeting the primary (preferred) objectives may make meetingthis secondary objective impossible in certain situations. Also, when acustomer's balance cannot be fully insured, the excess uninsured fundsshould be retained in the primary institution. Alternatively, asecondary objective advantageous to customers is to reduce risk byallocating a customer's deposits substantially equally among allindependent participating institutions.

In preferred embodiments the allocation and investment processes carryout the invention's objectives with both reasonable accuracy andefficiency by acting in a transaction-by-transaction fashion. Customerfunds may be allocated to reduce risk on a transaction-by-transactionbasis, with each customer transaction being allocated to a singleinstitution (which may be the primary institution). Transactions arecustomer withdrawals and deposits of all kinds. To maintain theintegrity of each institution's total deposits, the present inventionmay itself initiate transfer of customer funds between institutions.Most preferably, part of all of customer's funds in one institution maybe transferred to another institution. In this preferred embodiment,each institution's deposits can be exactly maintained. Inventionprocessing preferably occurs on a regular basis, for example, on anhourly, or a daily, or a weekly basis, and the like, but the inventionis not so limited. In most embodiments, it is expected that processingis performed each business day.

In a preferred embodiment, investment of customer funds to reduce riskis coupled to transferring funds between institutions to preserve totaldeposits, and both are triggered daily to process the batch of customertransactions received for that day. For example, as each customertransaction is processed, it is assigned to the customer's compositeaccount, which represents all transactions that have posted to theclient's account. After being posted to the composite accounts,transactions are then allocated to a selected sub-account, eachsubaccount being associated with one participating bank and representingthat portion of the customer's funds in that participating bank. If thisassignment would cause that customer's allocated funds to exceed thetarget amount in that participating bank, then the transaction isassigned to a sub-account associated with another participating bank inorder to maintain or maximize deposit insurance for that customer. Afterall transactions have been assigned, funds are re-allocated betweenbanks without compromising the customers' deposit insurance so that eachbank's total participating deposits equals the total participatingdeposits of its own customers. Preferably, customer funds arere-allocated only between secondary banks, and are not transferred outof the customer's primary bank.

The methods of this invention are performed by systems including suchdata processing components and facilities as are understood in the artto be necessary or preferred for performing such financial methods.These system receive and post customer transactions, allocate and investcustomer funds in participating institutions, issue commands andrequests to cause funds transfers among institutions, including inperson requests to move funds from a MMDA in a participating (oraffiliated or associated) bank to its paired DDA, and track and storerecords for transactions, fund transfers, and fund allocations in adatabase.

These system preferably inter-operate with financial systems of theparticipating institutions for the exchange of necessary data andcommands, and may inter-operate differently with different institutions.Generally, inter-operation with institutions may be arranged in one oftwo configurations. In a first configuration known as a sweep-typearrangement, the systems of this invention inter-operate on the behalfof a participating institution's customers primarily with the systems ofthat institutions alone (and not with external systems). Theinstitution's own systems then interface to external payment and fundstransfer networks on the behalf of its customers, collect theirtransactions, settle transaction with the external networks, and thenprovide participating customer transactions to systems of thisinvention, for example, as daily transaction files. The systems of thisinvention then receive, allocate, and invest transactions for theinstitution's participating customers, and inter-operate with theinstitution's systems to cause funds transfers between the institutionand the other participating institutions to preserve deposit positions.

In one variation of this configuration, the institution maintains itsown accounts (for example, DDA accounts) for participating customerswith minimum balances targeted to cover customers' observed and expecteddeposit and payment patterns. For example, the target minimum balancemay be a percentage based on past account use of the total balance.Customer account funds in excess of these target minimum balances areswept to and from the systems and accounts of this invention formanagement by the methods of this invention.

In a second configuration, the systems of the present invention take amore active role in the management of participating customer accounts ata participating institution. Here, this invention's systems directlyinterface to external payment and funds transfer networks on behalf ofthe institution's participating customers and collect customertransactions. These systems may then settle on the behalf of theinstitution with some or all of the external financial networks, orassist the institution to do so, and will thereby directly accumulatedaily customer transaction files for allocation and investment among theparticipating (or affiliated or associated) banks.

Also institutional systems and the system of this invention mayinter-operate in overlapping configurations. The participatinginstitution may collect and settle transactions with some externalfinancial networks, while the invention performs these functions withother financial networks. Here, transaction files from the institutionmay be merged with transaction files accumulated by this invention'ssystems prior to funds allocation. This invention may inter-operate withdifferent participating institutions in the same embodiment according toeither configuration.

In a further embodiment, a deposit interchange method, system andprogram product is disclosed for managing deposits and withdrawals amonga plurality of financial institutions participating in a program, witheach respective financial institution having a plurality of primaryclient transaction accounts for a plurality of primary clientsparticipating in the program and associated with the respectivefinancial institution, with each respective primary client having fundsthat were accepted for deposit in its respective primary clienttransaction account in the name of the respective primary client at itsassociated financial institution, and with each of the plurality offinancial institutions maintaining one or more FDIC-insured andinterest-bearing aggregated deposit accounts, the method comprising: (a)receiving respective excess amount data representing respective excessamounts, by one or more computers, for each of a plurality of respectiveprimary client transaction accounts for a plurality of primary clientsassociated with one of the financial institutions, the excess amountdata comprising, for each respective primary client transaction account,an amount by which a balance of funds in the respective primary clienttransaction account exceeds a specified amount, (b) allocating, by theone or more computers, one or more of the excess amounts between thefinancial institutions, with the allocating between the respectivefinancial institutions comprising: (1) determining, by the one or morecomputers, a respective primary client transaction account sum for eachof a plurality of the respective financial institutions, the respectiveprimary client transaction account sum comprising a sum of accountbalances of substantially all of the primary clients of the respectivefinancial institution participating in the program; (2) comparing, bythe one or more computers, the respective primary client transactionaccount sum for the respective financial institution to a fund balancein the one or more aggregated accounts of the respective financialinstitution to determine a respective surplus or a respective deficitfor the respective financial institution; (3) allocating by the one ormore computers funds among the aggregated accounts in the respectivefinancial institutions in order to bring, for each of a plurality of thefinancial institutions, the respective balance of funds in the one ormore aggregated accounts in the respective financial institution intosubstantial equality with their respective primary client transactionaccount sum for the respective financial institution; (c) updating orhaving updated, by the one or more computers, an electronic database toreflect this allocation among the financial institutions; and (d)generating and outputting, by the one or more computers, at least oneinstruction to transfer funds between aggregated deposit accounts basedat least in part on results of the allocating step (b).

BRIEF DESCRIPTION OF THE FIGURES

The present invention may be understood more fully by reference to thefollowing detailed description of the preferred embodiments of thepresent invention, illustrative examples of specific embodiments of theinvention and the appended figures in which:

FIG. 1 illustrates exemplary account structures maintained by thisinvention;

FIG. 2 illustrates periodic processing performed by this invention;

FIG. 3 illustrates file-processing steps of the periodic processing ofthis invention;

FIG. 4 illustrates post-to-sub-account steps of the periodic processingof this invention;

FIG. 5 illustrates re-allocation-processing steps of the periodicprocessing of this invention; and

FIG. 6 illustrates exemplary systems for practicing the presentinvention.

DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS

Preferred embodiments of the methods and systems of the inventionsummarized above are next described. Although the following descriptionis primarily directed to embodiments where the participating financialinstitutions are banks, the participating financial institution may benon-banks (e.g., broker/dealers, investment advisory firms, and soforth) that are associated or affiliated with a bank as described above.Also, although customer accounts may be described as DDA accounts, it isunderstood that customer accounts may also be at non-banks and then mayhave characteristics different from DDAs in banking institutions.

Account Structures in the Preferred Embodiments

In preferred embodiments, the present invention establishes andmaintains linked administrator and customer accounts in order toefficiently perform its processing. FIG. 1 illustrates exemplary accountstructures for a number, N, of customers at three financialinstitutions.

In particular, the accounts above separator line 3 represent forcustomers who are participating in this invention their managed accountsat their primary participating financial institutions. Accountsdisplayed between separator lines 1 and 3 are registered or related tospecific customers at the participating institutions, are used by theadministrator according to the methods of this invention to manage thecustomer's participating funds. Records for these accounts are stored inthis invention's databases (also referred to as the “administratordatabases”). Specifically, a customer's composite account (one only)represents that customer's total funds managed by this invention, whileeach sub-account of a customer's (one or more) represents the portion ofthat customer's managed funds held in the participating financialinstitution associated with the sub-account, where each sub-account isassociated with one participating financial institution.

Finally, accounts displayed below separator 1 are registered to theadministrator (or operating entity) of an embodiment as agent for theparticipating customers (“administrator accounts”). These accounts areeach in a bank associated with one participating financial institution,which holds the actual funds represented by the account, and are managedby the administrator according to the methods of this invention. Recordsfor these accounts are also stored in the administrator's databases.Funds of all the customer sub-accounts associated with eachparticipating institution are held by the administrator (as agent forthe customers) in the administrator accounts in the associated oraffiliated banking institution. (Where the participating institutionsare banks, the bank is its own “associated” institution.) Although thepresent description focuses on embodiments with one or two administratoraccounts per participating financial institution, in other embodimentsthe administrator may maintain a number of such accounts in eachinstitution as is convenient.

Considering first the administrator accounts (below separator line 3),this invention establishes and maintains in each participating financialinstitution (or its associated banking entity) an interest-earning andinsured MMDA account paired with a corresponding coupled DDA, the latterwithout withdrawal restrictions. The MMDA and DDA of each account pairare identically registered in each participating (or associated oraffiliated) bank, for example as “Administrator as Agent for theDesignated Customers” (or “Operating_entity_name as Agent for theDesignated Customers,” or a name with equivalent legal effect). FIG. 1illustrates MMDA-DDA account pairs 5, 7, and 9 held the in threeseparate participating financial institutions, institutions 1, 2, and 3.

As described above, participating customer deposits are invested (orheld) in the MMDAs at the various participating banks where they earninterest until needed to settle customer payments. Each MMDA willusually hold participating funds for a plurality of customers (a“pooled” MMDA). When funds are withdrawn from an MMDA to settle customerpayment transactions, this invention, first, generates instructions fora messenger (or other similar person or agent) to request in-persontransfer of the funds from the MMDA to the coupled DDA, and second,automatically transfers the funds from the DDA. Funds may be directlydeposited into the MMDAs of each account pair, or funds may beindirectly deposited into an MMDA through its coupled DDA.

Thus, for example, to withdraw funds from the pooled MMDA account ofpair 9, a messenger is instructed to request financial institution 3 totransfer selected funds from that MMDA to its identically-registered,coupled DDA. Once in the DDA of pair 9, funds may be automatically (thatis electronically) withdrawn as necessary. The embodiment of FIG. 1deposits funds into MMDAs through the coupled DDAs.

Turning next to the customer-related accounts (above separator line 3),FIG. 1 indicates schematically (by “ . . . ”, a notation used elsewherein FIG. 1) a plurality of participating, original accounts owned by aplurality of N customers, which are distributed among the threefinancial institutions. Only two exemplary participating originalaccounts, original customer account 11 for customer 1 of financialinstitution 1 and original customer account 13 for customer N offinancial institution 3, are explicitly illustrated. Where theparticipating institution is a bank, the original customer accounts mayconfigured according to various regulatory possibilities, but typicallywill be a demand deposit account (DDA) without withdrawal limitationsthat the customer uses to make payments and to receive deposits. Wherethe participating institution is not a bank (but is associated oraffiliated with a bank at least for the purposes of this invention), theoriginal customer accounts will be appropriate to that institution(e.g., a broker/dealer, investment advisory firm, a insurance company,or other type of financial institution offering customer accounts).

Participating funds (funds that actually participate in the methods ofthis invention) from each participating (original) customer account isaccounted for by a single composite account, which represents totalmanaged funds of that customer wherever the funds are currentlydeposited/invested. Further, each single composite account will have oneor more attached sub-accounts, which represent that customer's fundsactually held at the various participating (or affiliated or associated)banks. FIG. 1 (between separators lines 1 and 3) explicitly illustratescomposite account 15, representing participating funds from customeraccount 11, and composite account 17, representing participating fundsfrom customer account 13. Typically, all the funds in a customer'soriginal account will participate in and be managed by this invention.Alternatively, a certain percentage or dollar amount of customer fundsmay be retained in the customer's original account in the originalfinancial institution in order to settle transactions arising betweenthe periodic funds-allocation processing of this invention. Thispercentage or amount may be determined automatically based on thehistory of a customer's original account, or may be set by the customer,or may be otherwise determined.

Composite accounts represent both a customer's total funds participatingin this invention, and also by means of sub-accounts they also representthe allocation and investment of a customer's participating funds in theMMDA-DDA pairs maintained in the participating financial institutions.In the preferred embodiments, this allocation and investment isrepresented by one or more sub-accounts (and stored sub-account data)that are conceptually part of each composite account. In other words, iffunds of a composite account have been allocated to and invested in theMMDA-DDA pair maintained in a particular financial institution, thenthat composite account will have a separate sub-account representingthis allocation and investment. Because a customer's funds arepreferably invested in the customer's original financial institution tothe extent possible, each composite account will have a sub-account(referred to as the “primary” sub-account) representing allocation andinvestment in the primary institution. Where a customer's funds areinvested in two or more financial institutions, the composite accountwill have in addition to its primary sub-account one or more secondarysub-accounts representing investments in the secondary financialinstitutions. In all cases, the sum of all sub-account balances willequal the balance of the parent composite account.

For example, FIG. 1 illustrates that composite account 15 for client 1includes 19 three sub-accounts: primary sub-account 21 representscustomer l's funds that are allocated 33 to MMDA-DDA pair 5 in financialinstitution 1; secondary sub-account 23 represents funds allocated 35 toaccount pair 7 in financial institution 2; and secondary sub-account 25represents funds allocated 37 to account pair 9 in financial institution3. Sub-account 21 is primary because financial institution 1 is customerl's original and primary institution, while sub-accounts 23 and 25 aresecondary. Customer 1 has three sub-accounts to providedeposit-insurance coverage because the composite account balance isbetween two and three time the deposit-insurance target amount (forexample, between $190-285K). Next, for customer N, composite account 17includes 27 two sub-accounts: secondary sub-account 29 representingfunds allocated 35 to financial institution 2; and primary sub-account31 representing funds allocated 37 to financial institution 3. Customer2's sub-accounts provide deposit insurance coverage for balances betweenthe target amount and twice the target amount (for example, between$95-190K).

This invention may assign to each participating bank a unique code thatis then used to identify the primary bank to which each composite andsub-account belongs.

Funds Allocation Processing in the Preferred Embodiments

Using this account structure, preferred methods for allocatingparticipating customer funds among the participating banks are nowdescribed, commencing with the rules and objectives which guide fundsallocations and followed by a preferred implementation of these rulesand objectives.

Participating customer funds are generally invested according to aprocess which implements a number of rules in order to satisfy to theextent possible the goals and objectives of this invention. These rulesare generally divided into primary rules and secondary rules. It ishighly preferable that any allocation of participating funds alwayssatisfy the primary rules. However, depending on the number ofcustomers, the size of their participating funds, their primary banks,and so forth, no allocation of participating funds may be possible whichsatisfies both the primary and the secondary rules. In these situations,it is preferred that the secondary rules be satisfied to the extentpossible.

In preferred embodiments, funds investment or allocation is guided bytwo (a first and a second) primary allocation rules and by one or moresecondary allocation rules. The first primary rule, advantageous toparticipating customers, is to allocate a customer's participating fundsamong the MMDA-DDA pairs in order that the customer receives the maximumpossible deposit insurance. This is achieved by never allocating acustomer's participating funds so that a bank has more than the targetamount when another bank is allocated less than the target amount. Ifthe total amount of a customer's participating funds is equal to or lessthan a maximum insurance threshold, which is equal the target amount (orless preferably, the actual FDIC-maximum-coverage amount) times thenumber of participating banks, then all that customer's funds can becovered by deposit insurance. In the contrary case, where a customer'sparticipating funds exceed the maximum insurance threshold, then one ormore banks must hold more than the target amount of that customer'sfunds. In both cases, this first primary rule allocates funds so thatthe each customer's deposit insurance coverage is maximized.

The second primary rule is to allocate all participating funds so thateach bank has on deposit an aggregate amount of funds equal to thatbank's participating funds, whether or not the deposited funds are ownedby customers of that bank. Stated differently, the total of the funds ofall participating customers at a participating bank is considered hereinas that bank's aggregate or total participating funds. If the funds ofone or more customers must be transferred to other participating banksfor insurance coverage according to the first primary rule, thenaccording to this second primary rule an equal amount of funds should betransferred from other banks to this bank in order to maintain thisbank's aggregate funds on deposit. This rule is advantageous toparticipating banks, especially smaller banks, because a bank'saggregate deposits can be sources of income, for example, by beingavailable for loans.

Processing of these primary allocation rules by the methods of thisinvention provides participating banks with the ability to provideincreased FDIC insurance over the $100,000 coverage limits to their bankand/or brokerage customers by allocating and investing theirparticipating customer's balances in excess of $95,000 (or other targetamount) in interest bearing deposit accounts at other banks. The bankdoes not lose deposits held on its balance sheet, since it receivesreciprocal deposits, equal to deposits transferred out, transferred infrom other banks participating in this invention. For example supposebank A has a customer account with a balance of $300,000. Because FDICInsurance covers only the first $100,000 of this balance, by dividingthe additional $200,000 equally between bank B and bank C, bank A canprovide this customer with full FDIC coverage. Since bank A does notwant to lose the $200,000 in deposits, the methods of this inventionwill transfer to bank A $200,000 in deposits from other participatingbanks (perhaps, but not necessarily, banks B and C).

Because for non-bank participating institutions the original customeraccounts may not be insured, this invention permits these institutionsto offer deposit insurance for (some or all) of their customer accountsfor the first time. Similarly, this invention provides the participatinginstitution's affiliated or associated bank with total deposits equal tothe managed funds from the participating institution Thereby bothaffiliated or associated institution benefit.

One preferred secondary rule aims to never transfer customer fundsunless necessary to meet the first two primary rules. For example, it ispreferred not to transfer funds for a customer who has less that thetarget amount (for example, $95K) of funds on deposit. Also, acustomer's funds that exceed the maximum insurance coverage provided bythis invention (which equals the target amount times the number ofparticipating banks) should remain in that customer's primary bank. Eventhough situations may arise where this rule cannot be met for allcustomers, a preferred allocation method will satisfy this rule for manyof the participating customers.

Another preferred secondary rule is that it is preferable for customersof a bank to earn the rate of return specified by the primary bankregardless of which other participating banks hold these customers'funds. This rule may be simply satisfied by allocating the interestearned on investments in each bank's MMDA account to the customers ofthat bank, wherever their deposits are allocated. Since the allocationmethods provide each bank with aggregate total deposits equal to theaggregate total deposits of its participating customers, the totalamount of interest it pays will be the equal the amount of interest itwould have paid if no participating customer funds had been transferredfrom the bank. By allocating this amount of interest among its customersin its normal fashion, all these customers will receive their specifiedand expected rate of interest. Accordingly, it is preferable forparticipating banks to retain interest earned on their respective MMDAsand to allocate this interest to their own customers.

Aspects of these allocation rules can be illustrated by the followingexample having two participating banks, Bank A and Bank B, presented inTables 1-4. Table 1 illustrates hypothetical balances for both banksprior to the allocation processing of this invention according to whichBank A (B) has $100M ($50M) deposited in participating accounts andthese account have $12M ($9M) of balances in excess of the preferredinsurance-coverage target amount of $95K.

TABLE 1 TOTAL Bank A Bank B Participating deposits $100M $50M Balances$0-95K  $88M $41M Balances $95-190K  $12M  $9MTable 2 restates the data of Table 1 in a format identifying at eachbank the source of deposits. Table 2 illustrates that before allocationprocessing, Bank A (B) holds deposits of only Bank A's (B's) owncustomers.

TABLE 2 TOTAL Bank A Bank B Aggregate deposits $100M $50M Accounts withbalances $0-95K Cust. of Bank A  $88M 0 Cust. of Bank B 0 $41M Accountswith balances $95-190K Cust. of Bank A  $12M 0 Cust. of Bank B 0  $9M

In order that the participating customers are fully covered by depositinsurance (the first primary rule), all account balances over $95K mustbe moved out of their primary bank to a secondary bank. Table 3 (in rowssix and seven) illustrates this reallocation of $12M ($9M) of depositsof Bank A's (B's) customers to the MMDA in Bank B (A). Although allcustomers are now insured, Bank A's total aggregate deposits of $97M areless than its total participating deposits of $100M, and Bank B's totalaggregate deposits of $53M exceed its total participating deposits of$50M. In order words the second primary rule is not met.

TABLE 3 TOTAL Bank A Bank B Aggregate deposits $97M $53M Accounts withbalances $0-95K Cust. of Bank A $88M 0 Cust. of Bank B 0 $41M Accountswith balances $95-190K Cust. of Bank A 0 $12M Cust. of Bank B  $9M 0

Therefore, to satisfy the second primary rule, $3M must be transferredfrom Bank B to Bank A. Since no funds from accounts with balances over$95K (all from Bank A's customers) may be transferred without some ofthese Bank A customers losing insurance coverage, $3M in funds fromaccounts with deposits less than $95K (all from Bank B's customers) mustbe transferred. Table 4 (in row 4) illustrates the final allocationmeeting both primary rules.

TABLE 4 TOTAL Bank A Bank B Aggregate deposits $100M $50M Accounts withbalances $0-95K Cust. of Bank A  $88M 0 Cust. of Bank B   $3M $38MAccounts with balances $95-190K Cust. of Bank A 0 $12M Cust. of Bank B  $9M 0

In this example the secondary rule is violated. Certain customers ofBank B whose accounts have a balance less than $95K must have fundstransferred from their primary bank even though this is not preferred.Due to a greater need for increased deposit insurance coverage by BankA, certain Bank B customers that do not require increased depositinsurance have had their accounts transferred to Bank A in order to meetthe two primary objectives.

Now the preferred processes implementing these rules and objectives willbe described. Generally, these processes perform funds allocation in amanner that sufficiently approximates an exact solution to therule-constrained funds allocation problem; preferably, the fundsallocation satisfies exactly the allocation rules. The allocationprocess is usually performed on a regular basis with a frequencydetermined by characteristics the participating customers and financialinstitutions. In the case of retail customers of banks and similarinstitutions, allocation processing is preferably performed on a dailyor twice-daily basis during the business week. In situations wherecustomer transactions are relatively infrequent, processing may beperformed weekly or monthly. In other situations where typical customertransactions are comparable to the size of the target amount, then morefrequent, even transaction-by-transaction processing, processing may beadvantageous.

FIG. 2 illustrates in outline a preferred embodiment of regularprocessing, however frequently performed. After regular processing istriggered and commences 51, its first activities are to receivetransaction data for customer transactions that have occurred since thatlast regular processing 53. These transactions will in most casesrequire funds reallocation because customer balances are changed.Transactions may be received from the participating financialinstitutions, usually in batches such as transaction files.Alternatively, transaction may be received directly by the methods andsystem of this invention from external transaction sources, such aspayment and funds transfer networks, and stored in batches or files forlater processing. Once transaction batches or files have been receivedfor all participating customers, they are initially processed 55 andapplied to customer composite accounts stored in system databases.

Steps 57 and 59 are the heart of the regular funds allocation process.Step 57 first posts all received customer transactions to customercomposite accounts, and then allocates the posted transactions tocustomer sub-accounts in a manner that provides full deposit-insurancecoverage (or a maximum of coverage if full coverage is not possible).After step 57, although the first primary rule is satisfied, the secondprimary rule may not be satisfied: one or more individual participatinginstitutions may have total aggregate deposits that are more or lessthan the participating deposits of the own customers (referred to as“out of balance”). Accordingly, step 59 reallocates funds in customersub-accounts among the participating institutions to insure that theinstitutions are brought into balance. After transaction allocationprocessing of step 57 and sub-account re-allocation processing of step59, instructions are generated 60 and transmitted to cause transactionsettlement and funds transfer between participating institutions.Regular processing terminates at step 61.

In alternative embodiments, the principal steps, receiving transactiondata, allocating transactions, and re-allocating sub-account funds, maybe performed in different orders. For example, if the participatinginstitutions may tolerate being out of balance to a certain degree, thenreceiving transaction data and allocating transactions may be repeatedlyperformed 63 in a regular fashion as above while sub-account-fundreallocation is performed only when the out of balance condition exceedsthe tolerable degree.

Next, these individual processing steps illustrated in FIG. 2 will bedescribed in more detail with reference to FIGS. 3, 4, and 5. First,FIG. 3 illustrates file processing step 55 in more detail. Thisprocessing commences at step 71, and directly tests 75 for furthertransaction files 73 to process. If all received transaction files havealready been processed, file processing exits 77. Otherwise, fileprocessing tests 79 whether the input data relates to the opening (oravailability) of a new participating customer account. If so, theappropriate data structures necessary to manage this account are openedand initialized 81 in the invention's databases. The new data structuresinclude, at least, a new composite customer account and at least oneprimary sub-account. Secondary sub-accounts may also be opened andinitialized at this time if desired. Also, if the new account indicationhas been received directly by the administrator, it may be necessary toopen directly or indirectly a new customer account with the primaryfinancial institution. Otherwise, if the input data relates to dailycustomer transactions, then these transaction are applied 83 to thecustomer composite accounts stored in the invention's databases.Transaction are applied or posted in a standard manner as known in theart by recording transaction details in appropriate ledgers along withcurrent balance updates.

After received transactions are applied 55 (FIG. 2) to compositeaccounts stored in the administrator database, they are allocated andposted to 57 the customer sub-accounts, the balances of which indicatethe amount of a customer's funds in each participating institution. FIG.4 illustrates transaction allocation processing in more detail. Afterthis processing commences at 91, it tests for another unprocessedcomposite account 95 present in administrator database 93 and processesit if one is present; otherwise transaction allocation processing exits97. All composite accounts in the administrator database are therebyprocessed. As illustrated, preferred allocation processing is generallydivided into two parts, a first part which processes deposittransactions (or other types of transactions that increase customercomposite account balances) 115 followed by a second part whichprocesses withdrawal transactions (or other types of transactions thatdecrease customer composite account balances) 117. In alternativeembodiments the processing order of deposit and withdrawal transactionsmay be reversed; further, the processing of deposit and withdrawaltransactions may be interleaved in the order in which they are retrievedfrom the composite account.

Deposit transaction processing 115 generally seeks to add new depositsto a customer's primary sub-account in the customer's primaryinstitution if consistent with maximum deposit insurance. Otherwise, newdeposits are added to secondary sub-accounts to achieve maximum depositinsurance. Therefore, the existing balance in a customer's compositeaccount (or in the customer's primary sub-account) is tested 99. If theexisting balance plus the new deposit will not exceed the targetcoverage amount, then processing branches to the left at test 99, andthe new deposit may be allocated 103 to the customer's primarysub-account. On the other hand, if the existing balance in the primarysub-account plus new deposit exceeds the target coverage amount,processing proceeds to test 101, where the customer's secondarysub-accounts are tested to determine if there is at least one secondarysub-account with an existing balance so that after adding the newdeposit to the existing balance the sub-account will remain within thetarget amount. If there is at least one such secondary sub-account,processing branches at test 101 to the right, and the new deposit isallocated 107 to that sub-account. Also, this right-hand branch is takenwhere, although all existing secondary sub-accounts are too near thetarget amount, there exists another secondary institution not yet havinga secondary sub-account for this customer. Then, a new secondarysub-account may be opened 105 in that secondary institution and the newdeposit may be allocated 107 to that new sub-account.

Further, it may happen that a customer has secondary sub-accounts at allsecondary institutions none of which are capable of receiving the newdeposit without exceeding the target coverage amount. In this case, inthose embodiments where it is preferred to retain a customer's depositsin the customer's primary institution, the left-hand branch from test101 is taken, and the new deposit is allocated 103 to the primarysub-account. On the other hand, in those embodiments where it ispreferred to distribute a customer's excess balance (over the targetamount times the number of participating financial institutions) amongthe secondary institutions (or banks) to reduce risk, processing willbranch from test 101 to allocate the new deposit to that secondarysub-account 107 having the smallest existing balance or to the primarysub-account 103 if that account has the smallest current balance.

Withdrawal transaction processing 117, conversely to deposit processing,generally seeks to remove funds from a customer's secondary financialinstitutions so that the customer's primary institution holds the mostcustomer funds consistent with maximum deposit insurance coverage.Accordingly, withdrawal processing tests 109 if the customer has anysecondary sub-accounts with balances sufficient to satisfy the newwithdrawal transaction. If so, processing branches to the right at test109, and the withdrawal is posted 113 to that secondary sub-account.Where even distribution of a customers excess balance evenly among thesecondary institutions (or banks) is preferred, new withdrawals may beallocated to the secondary sub-account with the largest balance.Further, if no single subaccount has a sufficient existing balance tocover a new withdrawal, as much as possible of the withdrawal may becovered from two or more (or all) sub-accounts. In this case, one ormore (or all) sub-accounts may have be left with zero balances. If thewithdrawal cannot be satisfied by reducing all sub-accounts to zerobalance, the remainder can be covered by branching to the left andwithdrawing funds 111 from the primary account.

Finally, it is often advantageous to split both deposit and withdrawaltransactions among sub-accounts, allocating part of a transaction amountto one sub-account and part to another sub-account. For example, thismay be guided in order to achieve a better distribution of a customer'sexcess balances among the secondary sub-accounts or to maximize funds(preferably within the target amount) in the customer's primarysub-account.

Generally, although transaction allocation as described achieves thedeposit-insurance-coverage objectives of this invention, it may leavethe participating banks or financial institutions out of balance. Thesecond primary objective is that each participating bank be in balance,that is where with the total aggregate of the deposits allocated to eachbank equals the total participating deposits of the customers of thatbank. The total deposits allocated to a bank equals the sum of thebalances of all sub-accounts allocated to and held by that bank, whetheror not the sub-accounts are associated with customers of that bank; thebank's total participating funds equals the sum of the balances of thecomposite accounts of all the customers of that bank. It is convenientin the following to use the term “net difference” to stand for thedifference of these two sums, namely, the sum of the composite accountbalances subtracted from the sum of the balances of the allocatedsubaccount balances. Then a bank is said to be in surplus if its netdifference is positive; a bank is in balance if its net difference issubstantially zero; and a bank is in deficit if its net difference isnegative.

The following example, including three banks, Bank A, Bank B, and Bank Cand presented in Tables 5-7, illustrates that the results of transactionallocation may lead to need for funds re-allocation. First, Table 5illustrates exemplary results of a just-completed transaction allocationfor the present processing period. (Parenthesis enclosing an amountindicates that the amount is negative.) Here, Bank A started with $100Min aggregate total deposits as of the end of the previous regularprocessing. Bank A's transaction file for the current processing day isequal to $8M. Therefore, it has increased its aggregate deposit balancesby $8M. The transaction allocation for the present processing periodleads to a net of $8M in new deposits allocated to all the sub-accountsheld at Bank A. Of this $8M of new net deposits, customers of Bank Ahave generated a net of $8M of new deposits; customers of Bank B havegenerated $2M of net withdrawals; and customers of Bank C have generated$2M of new deposits. These nets are consistent because $8M=$8M−$2M+$2M.Therefore, Bank A's net difference is zero. The data for Banks B and Care similarly interpreted. Note that the transactions allocated andposted to the sub-accounts held at a specific bank may or may not be inthe transaction file sent by that bank, since not all subaccounts heldat the bank are for customers of the bank.

TABLE 5 BANK A B C Bank deposits as of the $100M $50M $30M previous dayNet transactions allocated   $8M  $6M  $3M to bank from all receivedtransaction files Breakdown of net trans- A = $8M; A = ($2M); A = $2M;actions by customers of B = ($2M); B = $6M; B = ($1M); bank C = $2M C =$2M C = $2MNext, Table 6 presents that same data as Table 5 organized by thecustomers of each bank instead of by bank.

TABLE 6 Total net transactions Net transactions in sub- of bank accountsallocated to BANK Customers of BANK customers A B C A $8M $8M ($2M) $2MB $3M ($2M) $6M ($1M) C $6M $2M $2M $2M Total net transactions for sub-$8M $6M $3M accounts allocated to this bank

For example, customers of Bank B have generated a net deposit of $3M,which results in an increase of the sum of their composite accounts bythis amount. This net represents $2M of net withdrawals from Bank-B'ssecondary sub-accounts that are held at Bank A, $6M of net deposits inBank-B's primary sub-accounts held at Bank B, and $1M of net withdrawalsfrom Bank-B's secondary sub-accounts that are held at Bank C. Again,these nets are consistent because $3M=−$2M+$6M−$1M. The data forcustomers of Banks A and C are similarly interpreted

Finally, Table 7 illustrates determination of the surplus/deficit statusof the participating bank and the funds re-allocation needed (assumingthe banks were all initially in balance). For example, Bank C hasexperienced a $3M increase in aggregate participating deposits, because$3M in customer transactions were allocated to it as indicated in Table5. However, Table 6 indicates that the customers of Bank C generated $6Min net deposits. Therefore, Bank C has a negative net_difference, ordeficit, of $3M; $3M needs to be transferred into Bank C from Banks Aand B so that its aggregate deposits equals the aggregate deposits ofits customers. Similar interpretation of the results for Banks A and Bindicate that Bank A remains in balance while Bank B has a positivenet_difference, or surplus, of $3M. All the banks will be in balanceagain after a funds transfer of $3M from Bank B to Bank C.

TABLE 7 BANK A B C Aggregate bank deposits on previous day $100M $50M$30M Change in sub-accounts attached to the   $8M  $6M  $3M bank at endof this day (= net transactions allocated to this bank) Change inaggregate deposits of all   $8M  $3M  $6M customers of this bank (= nettransactions of all customers of this bank) Status (net_difference)Balanced Surplus Deficit of $3M of $3M Re-allocation needed $0  ($3M) $3M

In summary, funds re-allocation is usually needed because the nettransaction balances allocated to a bank usually does not equal the nettransaction balances of the bank's customers (or customers of itsaffiliated or associated participating financial institution).

Now returning to this invention's processing methods, FIG. 5 illustratesfunds reallocation processing, step 59 (FIG. 2), in more detail in viewof the prior example. After commencing 131, classification step 135retrieves data from administrator databases 133, which store compositeaccount and sub-account records, and classifies all participatingfinancial institutions (for example, participating banks) as being insurplus, in balance, or in deficit according to the net_differencedefinition above. This classification is processed in a fashionanalogous to the exemplary classification of Banks A, B, and C in theprior example. After surplus/balance/deficit classification 135,re-allocation processing determines 137 if there are any institutionsare in surplus. Processing exits 139 if no further institutions are insurplus, because if there are no institutions in surplus, then allinstitutions are in balance. Any institution that is in deficit meansthat there are one or more other institutions in surplus, andconversely. (Similarly, processing may determine if there are anyinstitutions in deficit.) However, if at least one institutions is stillin surplus (and thus one or more are still in deficit), re-allocationprocessing must continue.

Re-allocation processing seeks to transfer sub-account balances fromsurplus institutions to deficit institutions until all are in balance.Secondary sub-accounts are preferentially transferred out of a surplusinstitution to a deficit institution; however, if transfer of allsecondary sub-accounts does not achieve balance, then primarysub-accounts, that is sub-accounts for customers of the surplusinstitution, are also transferred. Therefore, processing next finds 141secondary sub-accounts at a surplus institution (which it should berecalled are sub-accounts for individuals who are not customers of thatsurplus institution). Certain secondary sub-accounts are “fixed,” andmay not be transferred to an in-deficit institution. For example, acandidate secondary sub-account may not be transferred if transfer ofpart or all of its current balance will decrease insurance coverage forthat subaccount's owner. This will occur, for example, if the existingbalances of that customer's sub-accounts at the currently in-deficitinstitutions are too close to (or are at) the target amount, and cannotaccommodate funds from the candidate secondary sub-account. Test 143bypasses all such “fixed” sub-accounts.

Having found a sub-account eligible for transfer, all of part istransferred 145 to an in-deficit institution. If the current in-surplusinstitution may be balanced by transfer of only a part of the eligiblesub-account, the necessary part is transferred leaving the institutionnow in balance. Otherwise, the entire sub-account is transferred.Alternatively, as much as possible of the sub-account is transferredwithout causing a decrease in that customer's insurance coverage. If thecurrent in-surplus institution is now in balance 147, re-allocationprocessing checks again 137 for another in-surplus institution. However,if transfer of all possible funds from secondary sub-accounts does notbalance the current in-surplus institution, then funds will betransferred from one or more primary sub-accounts. Primary sub-accountsare selected and processed for transfer 149 in a fashion analogous tothat for secondary subaccounts. However, transfers that will decreaseinsurance coverage for the account's owner are not allowed.

Transfers of funds preferably are determined to leave the financialinstitutions exactly in balance with a net_difference of zero. However,in certain embodiments it may not be possible to exactly balanceinstitutions because of, for example, funds transfer restrictions,timing differences between transaction processing and funds transfer,and the like. In such embodiments, financial institutions should besubstantially in balance by having the net_difference to be no more than5%, or 2%, or 1%, or 0.5%, or 0.1% of the total customer accountbalances.

Additionally, the methods of this invention preferably generate customerstatements that display the customer transaction activity posted to thecomposite account along with the customer's balances (in sub-accounts)held at each participating financial institution or bank. Thesestatements are usually generated monthly.

Systems Preferred for this Invention

FIG. 6 generally illustrates exemplary administrator systems of thisinvention, which, along with certain external system with which theadministrator systems cooperate, are for performing the above-describedmethods of this invention. Computer system 201, including processingunit, memory, communication interface, user interfaces, and the like, isconfigured with a performance and reliability acceptable for financialprocessing as is known in the arts. For example, such computers alongwith industrial-strength operating software are available from IBM andother well known manufacturers. Administrator systems also includedatabase storage 202, preferably highly reliable, for storing accountdata, including composite account data, sub-account data, MMDA-DDAaccount-pair data, and such other administrative data needed forcustomer funds management.

The methods of this system are programmed, preferably in a suitable,commercial or financial programming language, and translated intomachine instructions which cause computer 201 and its operating softwareand database 202 to perform this invention's methods. This inventionalso includes program products comprising computer readable mediacontaining encoded representations of such machine instructions. Suchcomputer readable media are well known in the art (and include networkdistribution).

In order to perform this invention's methods, the administrator systemsare preferably in communication with external systems which provideimportant data, such as sources 204 of customer transaction data. Thisinvention includes processing, posting, and allocation of various typesof customer transactions, for example, ACH credit/debit transactions,debit and credit card transactions, sweep transaction from participatingfinancial institutions, check/draft payments and deposits, FED wiretransfers, and transactions originating over the telephone, theinternet, in person, and so forth. Generally, as known in the art,different transaction types originate from different external systems,and may arrive transaction-by-transaction or may be batched intoperiodic (e.g., daily) transaction files.

In most embodiments, the administrator systems are in communication withexternal systems 203 of the participating financial institutions. Forparticipating banking institutions, both customer account informationand MMDA-DDA account-pair information may be exchanged with theirexternal systems 203. For other types of participating financialinstitutions, primarily customer account information is exchanged, whilerelated MMDA-DDA account-pair information is exchanges with the systemsof that institutions affiliated or associated bank. In certainembodiments, one or more of the participating financial institutions maydirectly receive customer transactions and then exchange them with theadministrator systems as a batch file. Accordingly, communicationsbetween the administrator systems, the transaction source systems, andthe participating financial institution systems may be direct orindirect.

Finally, communication links 205 a and 205 b between these systems maybe of the many types known in the art. They may be private links thatare used only for the purposes of this invention. Alternatively, theselinks may be shared as part of private clearing house networks, of bankcard networks, of Federal Reserve Board networks, and the like. As alsoknown in the art. these links may be configured as point-to-point links,or a networks, or a networks of networks, such as the Internet.

The invention described and claimed herein is not to be limited in scopeby the preferred embodiments herein disclosed, since these embodimentsare intended as illustrations of several aspects of the invention. Anyequivalent embodiments are intended to be within the scope of thisinvention. Indeed, various modifications of the invention in addition tothose shown and described herein will become apparent to those skilledin the art from the foregoing description. Such modifications are alsointended to fall within the scope of the appended claims. A number ofreferences are cited herein, the entire disclosures of which areincorporated herein, in their entirety, by reference for all purposes.Further, none of these references, regardless of how characterizedabove, is admitted as prior to the invention of the subject matterclaimed herein.

What is claimed is:
 1. A method, comprising: accessing by or for a firstbanking institution, using one or more computers, one or more electronicdatabases, stored on one or more computers-readable media in theperformance of one or more of the following steps, the one or moredatabases comprising: (1) aggregated account information comprising: (a)a balance of funds for each of one or more Federal Deposit InsuranceCorporation (FDIC)-insured and interest-bearing aggregated depositaccounts held at the first banking institution that is participating ina program, the program comprising a plurality of FDIC-insured andinterest-bearing aggregated deposit accounts held in a plurality ofbanking institutions including the first banking institution, with theone or more aggregated deposit accounts providing insured non-penalizedliquidity for the funds held therein; and (2) client account informationfor one or more respective client transaction accounts of one or morerespective clients of the first banking institution, with the clientaccount information for respective client transaction accounts,comprising: (a) a respective client transaction account balance of fundsfor the respective client transaction account; and (b) a respectivetotal balance of funds of the respective client transaction account heldin the program in other of the banking institutions, not including thefirst banking institution, participating in the program; obtaining by orfor the first banking institution, using the one of more computers,transfer data associated with transfers to and/or from the programassociated with one or more of the client transaction accounts of thefirst banking institution, and storing this transfer data in the one ormore databases; receiving or obtaining aggregated account transferinformation by or for the first banking institution, using the one ormore computers, to deposit to or to withdraw an amount of funds from theone or more aggregated deposit accounts held in the first bankinginstitution, based at least in part on a difference between an amountcomprising a total of funds from the client transaction accounts of thefirst banking institution held in the aggregated deposit accounts in theother banking institutions participating in the program and the total offunds held in the one or more aggregated deposit accounts held in thefirst banking institution; transferring or having transferred by or forthe first banking institution, using the one or more computers, inaccordance with the aggregated account transfer information, fundsbetween the one or more aggregated deposit accounts held in the firstbanking institution and one or more of the aggregated deposit accountsheld in one or more other of the banking institutions participating inthe program; calculating or having calculated by or for the firstbanking institution, using the one or more computers, based at least inpart on the transfer data and the aggregated account transferinformation, the respective balance of funds for each of the one or moreaggregated deposit accounts held in the first banking institution, therespective client transaction account balances of funds for therespective client transaction accounts of the first banking institution,and the respective total balance of funds of the respective clienttransaction accounts of the first banking institution held in theprogram in the other banking institutions participating in the program;and updating or having updated by or for the first banking institution,the balance of funds for each of the one or more aggregated depositaccounts held in the first banking institution, the respective clienttransaction account balances of funds for the respective clienttransaction accounts of the first banking institution, and therespective total balance of funds of the respective client transactionaccounts of the first banking institution held in the program in otherbanking institutions participating in the program, in the one or moredatabases, based at least in part on the balances calculated in thecalculating step, using the one or more computers.
 2. The method asdefined in claim 1, further comprising authorizing or rejecting paymentsrequested from at least one client transaction account by the one ormore computers of the first banking institution.
 3. A method,comprising: accessing by or for a first banking institution, using oneor more computers, one or more electronic databases, stored on one ormore computers-readable media in the performance of one or more of thefollowing steps, the one or more databases comprising: (1) aggregatedaccount information comprising: (a) a balance of funds for each of oneor more Federal Deposit Insurance Corporation (FDIC)-insured andinterest-bearing aggregated deposit accounts held at the first bankinginstitution that is participating in a program, the program comprising aplurality of FDIC-insured and interest-bearing aggregated depositaccounts held in a plurality of banking institutions including the firstbanking institution, with the one or more aggregated deposit accountsproviding insured non-penalized liquidity for the funds held therein;and (2) client account information for one or more respective clienttransaction accounts of one or more respective clients of the firstbanking institution, with the client account information for respectiveclient transaction accounts, comprising: (a) a respective clienttransaction account balance of funds for the respective clienttransaction account; and (b) a respective total balance of funds of therespective client transaction account held in the program in other ofthe banking institutions, not including the first banking institution,participating in the program; receiving or obtaining by or for the firstbanking institution, using the one or more computers, transaction dataassociated with one or more of the client transaction accounts, thetransaction data comprising one or more individual credits and/or one ormore individual debits and/or a summary thereof for each of one or moreof the client transaction accounts, and storing this transaction data inthe one or more databases; generating by or for the first bankinginstitution, based at least in part on the transaction data anelectronic transaction file comprising respective amounts of respectiveones of the client transaction accounts of the first banking institutionto be transferred to or from one or more of the other bankinginstitutions participating in the program, using the one or morecomputers; and sending by or for the first banking institution, usingthe one or more electronic networks and the one or more computers of thefirst banking institution, the electronic transaction file to theprogram administrator; obtaining by or for the first bankinginstitution, using the one of more computers, transfer data associatedwith transfers to and/or from the program associated with one or more ofthe client transaction accounts of the first banking institution, andstoring this transfer data in the one or more databases; receiving orobtaining aggregated account transfer information by or for the firstbanking institution, using the one or more computers, to deposit to orto withdraw an amount of funds from the one or more aggregated depositaccounts held in the first banking institution, based at least in parton a difference between an amount comprising a total of funds from theclient transaction accounts of the first banking institution held in theaggregated deposit accounts in the other banking institutionsparticipating in the program and the total of funds held in the one ormore aggregated deposit accounts held in the first banking institution;transferring or having transferred by or for the first bankinginstitution, using the one or more computers, in accordance with theaggregated account transfer information, funds between the one or moreaggregated deposit accounts held in the first banking institution andone or more of the aggregated deposit accounts held in one or more otherof the banking institutions participating in the program; updating orhaving updated by or for the first banking institution, the balance offunds for each of the one or more aggregated deposit accounts held inthe first banking institution, the respective client transaction accountbalances of funds for the respective client transaction accounts of thefirst banking institution, and the respective total balance of funds ofthe respective client transaction accounts of the first bankinginstitution held in the program in the other banking institutionsparticipating in the program, in the one or more databases, based atleast in part on the transfer data and the aggregated account transferinformation, using the one or more computer.
 4. The method as defined inclaim 1, wherein the aggregated account transfer information received orobtained by or for the first banking institution is to deposit to or towithdraw an amount of funds from the one or more aggregated depositaccounts held in the first banking institution, to change the differencebetween the amount comprising the total of funds from the clienttransaction accounts of the first banking institution held in theaggregated deposit accounts in the other banking institutions in theprogram and the total of funds held in the one or more aggregateddeposit accounts held in the first banking institution so that thedifference is substantially zero.
 5. The method as defined in claim 1,wherein the aggregated account transfer information received or obtainedby or for the first banking institution is to deposit to or to withdrawan amount of funds from the one or more aggregated deposit accounts heldin the first banking institution, to change the difference between theamount comprising the total of funds from the client transactionaccounts of the first banking institution held in the aggregated depositaccounts in the other banking institutions in the program and the totalof funds held in the one or more aggregated deposit accounts held in thefirst banking institution so that the total of funds from the clienttransaction accounts of the first banking institution held in theaggregated deposit accounts in the other banking institutions in theprogram is greater than the total of funds held in the one or moreaggregated deposit accounts held in the first banking institution. 6.The method as defined in claim 1, wherein the aggregated accounttransfer information received or obtained by or for the first bankinginstitution is to deposit to or to withdraw an amount of funds from theone or more aggregated deposit accounts held in the first bankinginstitution, to change the difference between the amount comprising thetotal of funds from the client transaction accounts of the first bankinginstitution held in the aggregated deposit accounts in the other bankinginstitutions in the program and the total of funds held in the one ormore aggregated deposit accounts held in the first banking institutionso that the total of funds held in the one or more aggregated depositaccounts held in the first banking institution is greater than the totalof funds from the client transaction accounts of the first bankinginstitution held in the aggregated deposit accounts in the other bankinginstitutions in the program.
 7. The method as defined in claim 1,wherein the aggregated account transfer information received or obtainedby or for the first banking institution is to deposit or to withdrawonly government entity funds from the one or more aggregated depositaccounts held in the first banking institution.
 8. The method as definedin claim 1, wherein the aggregated account transfer information receivedor obtained by or for the first banking institution is to deposit to orto withdraw an amount of funds from the one or more aggregated depositaccounts held in the first banking institution, so that the differencebetween the total of funds from the client transaction accounts of thefirst banking institution held in the aggregated deposit accounts in theother banking institutions in the program is no more than a percentageof the total of funds held in the one or more aggregated depositaccounts held in the first banking institution.
 9. The method as definedin claim 1, further comprising: receiving or obtaining by or for thefirst banking institution, using the one or more computers and one ormore electronic networks, an identification for each of a plurality ofthe respective client transaction accounts of the first bankinginstitution, of each of one or more of the banking institutionsparticipating in the program that holds funds originating from therespective client transaction account and a respective amount of therespective client transaction account held in the respective identifiedbanking institution of the funds originating from the respective clienttransaction account; and storing, using the one or more computers, thisidentification of the one or more banking institutions for therespective client transaction accounts in the one or more databases. 10.The method as defined in claim 3, wherein the transaction data receivedor obtained is from an external system, wherein the external system isselected from a group consisting of an ACH system, a credit cardprocessing system, a debit card processing system, systems of otherfinancial institutions, a check/draft payments system, a FED wiretransfers system, a telephone network, and the internet, and wherein theone or more computers are linked via the one or more electronic networksto one or more computers of one or more external systems.
 11. The methodas defined in claim 3, wherein the aggregated account transferinformation received or obtained by or for the first banking institutionis to deposit to or to withdraw an amount of funds from the one or moreaggregated deposit accounts held in the first banking institution, tochange the difference between the amount comprising the total of fundsfrom the client transaction accounts of the first banking institutionheld in the aggregated deposit accounts in the other bankinginstitutions in the program and the total of funds held in the one ormore aggregated deposit accounts held in the first banking institutionso that the difference is substantially zero.
 12. The method as definedin claim 3, wherein the aggregated account transfer information receivedor obtained by or for the first banking institution is to deposit to orto withdraw an amount of funds from the one or more aggregated depositaccounts held in the first banking institution, to change the differencebetween the amount comprising the total of funds from the clienttransaction accounts of the first banking institution held in theaggregated deposit accounts in the other banking institutions in theprogram and the total of funds held in the one or more aggregateddeposit accounts held in the first banking institution so that the totalof funds from the client transaction accounts of the first bankinginstitution held in the aggregated deposit accounts in the other bankinginstitutions in the program is greater than the total of funds held inthe one or more aggregated deposit accounts held in the first bankinginstitution.
 13. The method as defined in claim 3, wherein theaggregated account transfer information received or obtained by or forthe first banking institution is to deposit to or to withdraw an amountof funds from the one or more aggregated deposit accounts held in thefirst banking institution, to change the difference between the amountcomprising the total of funds from the client transaction accounts ofthe first banking institution held in the aggregated deposit accounts inthe other banking institutions in the program and the total of fundsheld in the one or more aggregated deposit accounts held in the firstbanking institution so that the total of funds held in the one or moreaggregated deposit accounts held in the first banking institution isgreater than the total of funds from the client transaction accounts ofthe first banking institution held in the aggregated deposit accounts inthe other banking institutions in the program.
 14. The method as definedin claim 3, wherein the aggregated account transfer information receivedor obtained by or for the first banking institution is to deposit or towithdraw only government entity funds from the one or more aggregateddeposit accounts held in the first banking institution.
 15. The methodas defined in claim 3, wherein the aggregated account transferinformation received or obtained by or for the first banking institutionis to deposit to or to withdraw an amount of funds from the one or moreaggregated deposit accounts held in the first banking institution, sothat the difference between the total of funds from the clienttransaction accounts of the first banking institution held in theaggregated deposit accounts in the other banking institutions in theprogram is no more than a percentage of the total of funds held in theone or more aggregated deposit accounts held in the first bankinginstitution.